Why It Would Be A Disaster If The Supreme Court Banned Aereo

There is a very good chance that the U.S. Supreme Court will
declare that Aereo, the company that redirects broadcast TV
signals over the Internet to your laptop, tablet, or phone, is
illegal.

The high court justices heard oral arguments in the case today.

If they rule that Aereo is taking broadcasters' signals without
their permission, the company is toast. Its CEO Chet Kanojia has
said there is no "Plan B" if Aereo loses. The company will likely
have to shut down.

That would be a shame. It would be a huge loss for consumers. And
in the long run, perhaps also a huge loss for the traditional TV
business that is hoping to kill Aereo.

And it would chill innovation in the cloud media industry, in
much the same way that putting Napster out of business largely
managed to relegate peer-to-peer media sharing apps to the margin
of criminality. There is just something wrong about the judicial
branch ruling that new uses for old technologies are illegal.

Here is how Aereo works: The law allows anyone with a TV antenna
(rabbit ears, as your parents used to call them) to watch
broadcast TV for free. The broadcasters sell ads on TV to pay for
that, and make a profit doing so. Because more and more people
are turning away from their TV sets in order to watch video on
demand on their phones, tablets or laptops, free broadcast TV is
under threat as a business. It survives mostly because cable
companies bundle it with cable channels and pay the broadcasters
retransmission fees to do so. And most people are happy to watch
it as long as it comes alongside ESPN and HBO.

Aereo is one of those devices that's so simple it's brilliant:
The company owns thousands of individual TV antennas which it
stores centrally, one for each viewer, per the law. Aereo
restricts you to watching within the market you subscribe to as
well. For example, a New York City Aereo subscriber can't access
her account if she's in Los Angeles.

You'd think that the TV companies would be cheering for this new
device. Somehow, after years of audience declines, Aereo has
found a new audience of viewers who love free broadcast TV so
much they're willing to pay Aereo's monthly subscription fee to
watch it. These people aren't just TV viewers, they're
super-TV viewers and — arguably — much more
valuable to the advertisers who fill CBS and Fox's coffers.

But no, all Fox, CBS et al. can see is a company that
takes a fee for displaying something they were previously giving
away for free. They regard Aereo's retransmission of their signal
as being identical to a cable company retransmitting the signal
without paying for it.

But to Aereo's credit, that's not how it's acting. Because Aero
has an antenna for every viewer, the only change the company has
made in broadcast consumption is to separate the viewer from the
antenna. The monthly fee, arguably, is not for the TV shows
themselves but for the viewer's ability to record and store them
on the equivalent of a DVR, which is also stored remotely on
Aereo's cloud servers. Again, this is exactly what free TV
viewers do already — it's just that the antenna and the DVR
are in their homes instead of a remote server.

What's frustrating about the Aereo litigation is that in an
alternative universe, the TV networks would have asked Aereo for
its audience data and then sold those super-TV viewers at a
premium to advertisers. This, in fact, is what has happened to
regular DVR viewers. Initially, advertisers declined to pay for
them because they weren't watching live. It took years before
advertisers and broadcasters realized that someone who records a
whole season of shows and then binge-watches them in a single
weekend is a more attentive viewer than someone watching live.
(And if you don't believe me, consider how attractive a Viking
river cruise in Europe now seems after four seasons of Downton
Abbey.)

Rather than embracing this new media for old TV, the networks
have threatened to end free TV altogether.
CBS and Fox have both said
they will restrict their "broadcast" signal to cable
providers if they lose this case. (Ironically, this would make
them even more dependent on the business model that was so
dysfunctional it spawned Aereo in the first place.) But there's a
problem if the networks lose the Aereo case and make good on
their threats. They would be disenfranchising the millions of
folks who benefit from free news and entertainment by accessing
broadcast networks the old fashioned way, over the air.

The worst part of this is the threat the case poses to cloud
media businesses. Any company whose business model relies on
letting viewers store copyrighted material on a remote server for
later viewing could find itself suddenly illegal, if the Supreme
Court writes its ruling the "wrong " way.

Make no mistake, large media companies hate technical
innovation. TV and movie studios also believed that DVRs and VHS
cassettes would kill their businesses. In fact, they enhanced
them. Aereo is simply a remote personal video recorder.